19849 KESWICK LN., HUNTINGTON BEACH: This foreclosed condominium sold for &#036;420,000 in September of 2006. ROSE PALMISANO, THE ORANGE COUNTY REGISTER

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8222 KATHERINE DR., HUNTINGTON BEACH: This foreclosed 3 bedroom home sold for &#036;980,000 in May of 2006. This is your foreclosure nightmare, neighbors say. ROSE PALMISANO, THE ORANGE COUNTY REGISTER

1 of 10

8222 KATHERINE DR., HUNTINGTON BEACH: This foreclosed 3 bedroom home sold for &#036;980,000 in May of 2006. This is your foreclosure nightmare, neighbors say. ROSE PALMISANO, THE ORANGE COUNTY REGISTER

17052 KAMPEN LN, HUNTINGTON BEACH, This foreclosed 3 bedroom home sold for $600,000 in August of 2005. ROSE PALMISANO, THE ORANGE COUNTY REGISTER

HUNTINGTON BEACH In the midst of a nationwide housing crisis, some cities in the region are looking to take advantage of the bad hand they've been dealt by reining in vacant foreclosed homes that are generating fewer and fewer property tax dollars.

Surf City is the latest municipality in the county -- following Fountain Valley -- to consider going into the real-estate business by buying up foreclosed homes, fixing them up and then selling them to city residents who qualify for affordable housing.

Huntington Beach officials may join a short list of cities statewide if council members vote tonight to start a foreclosure purchasing program. Officials say they hope the initiative will feed city funds, revitalize slumping neighborhoods and help meet their affordable housing quota.

The next day, Fountain Valley will vote on whether to approve guidelines of its own program

"From what I've heard… I think it's a positive thing … if we can get a house back in circulation,'' said Huntington Beach Mayor Keith Bohr. "They're just there vacant … open to vandalism and not maintained. That's not good for anybody."

Some local real-estate experts think the program is worth considering. However, they question the execution of such a program, wondering whether taxpayers would truly benefit in the long run.

"I think it's a great idea,'' said Dennis C. Smith, mortgage broker and co-owner of Stratis Financial in Huntington Beach. "My concern is they're putting people into homes that can afford to buy them…"

He suggested city officials follow Habitat for Humanity's model.

"They get low interest rate loans, the families have to spend so many hours working on the homes … (or) if there's some way the city can extract some pound of flesh back to the community," Smith said.

Huntington Beach Redevelopment Agency officials will be quite choosy about who would qualify for the homes and assist them in the form of a second mortgage loan, according to a staff report.

The point is to rid the community of vacant eyesores and provide affordable housing to low- and moderate-income home buyers who were essentially priced out of the coastal city's market only a few years ago, Economic Development Director Stanley Smalewitz said.

"Obviously it would be town homes and very basic, single family homes in affordable neighborhoods," he said

Initially, Smalewitz said, the city would put in a little more than $1 million into the program, hoping to funnel in more from federal- and state-generated funding initiatives that might function as a revolving fund.

Other cities have held off on doing anything.

Buena Park discussed the possibility of a city home purchasing program earlier this year, but officials decided not to pursue it because of the possibility of federal funding.

Smalewitz said he wanted the city to take a proactive approach.

"I want to have a basket built for additional funding," Smalewitz said. "We're being prudent and trying to anticipate. We're being proactive rather than reactive."

Smalewitz said city officials would negotiate with lenders for the purchase of a vacant home at a good, affordable price, and would make up to $50,000 in fixes before selling it in perhaps a lottery-type of system.

Applicants would need to meet certain affordable housing qualifications and priority would be given to current city residents or people working in the city, especially city workers.

Potential candidates would need a 5 percent down payment and funds for closing cost in addition to being pre-qualified by an approved lender and able to meet the income and credit qualifications required for a conventional loan.

The program is similar to the plan proposed in Fountain Valley, and in the city of Lancaster, where officials agreed to start buying foreclosed homes in August of last year.

About 80 homes are currently in some stage of foreclosure in Fountain Valley, city officials said.

As of Dec. 2 there were about 48 homes in Huntington Beach undergoing the final phase of the foreclosure process. Those homes will join the 117 already existing vacant, bank-owned properties in the city, according to city documents.

That number is expected to climb.

"It is expected that the number of foreclosures may increase substantially as more and more adjustable-rate mortgages start to re-adjust and homeowners find they can no longer afford the homes they bought a mere few years ago," the staff report reads.

Huntington Beach and Fountain Valley officials say they are hoping to spark affordable home ownership and get rid of the blight caused by unoccupied homes.

That would mean some cost savings in fewer code enforcement violations to clean up after, such as mosquito abatement, loss in collection of sewer and water bills and trash and abandoned furniture among other problems, officials say.

As of January, Huntington Beach responded to 178 calls about vacant and foreclosed residential properties, according to city documents.

Lancaster city officials said they have been successful in their program, snagging up 100 foreclosed homes.

However, city government and the bureaucracy that comes with it tends to slow the process, said Elizabeth Brubaker, director of Housing Neighborhood Revitalization of the Lancaster Redevelopment agency.

That's why, she said, city officials have gotten around to marketing only five homes.

"This isn't private industry at work here, it's government," she said. "We're really a fast organization but there's a reason why we have government codes. It's because we are the stewards of (taxpayer)…government funds."

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